Microsoft Building Windows Phone?

It may be testing a prototype

After denying it had such plans earlier this year, Microsoft reportedly is developing a self-branded Windows Phone 8 smartphone that would compete with products sold by its existing partners, including Nokia and Samsung.

Citing unidentified sources, The Wall Street Journal said Microsoft is testing prototypes with Asian component suppliers. The newspaper's sources said the device would feature a screen measuring between four and five inches diagonally. That would put it somewhere between Apple's new iPhone 5, and the larger Samsung Galaxy III.